The Chinese government reacted angrily over the weekend to the news that 39 companies in China and Hong Kong had been placed on a list of companies that are subject to special export controls when doing business with US companies.

The so-called Entity List, maintained by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), names companies, individuals and even business offices to which U.S. firms are prohibited from supplying goods without a license. The latest addition to the list concerns companies that have helped Russian military-affiliated companies obtain U.S.-made goods that cannot be legally sold to them.

“BIS, in coordination with our allies and partners, has taken aggressive action to enforce strict export controls in response to Russia’s illegal, unprovoked, and large-scale invasion of Ukraine. Today’s action is an extension of this important and ongoing work,” Alan Estevez, undersecretary of Commerce, Industry, and Security, said in a statement.

“We will continue our multilateral approach to address this issue from all sides and use every tool at our disposal to prevent Russia from gaining access to the advanced U.S. technology needed for its weapons,” he said.

Long-arm jurisdiction

According to the state news agency Xinhua, a spokesman for the Chinese Ministry of Commerce said that Beijing “firmly opposes” the inclusion of Chinese companies in the Entity List.

In an article that appeared to reproduce the unpublished remarks of a spokesperson, Xinhua wrote: “This move is a typical act of unilateral sanctions and sweeping jurisdiction, the spokesperson said in an online statement. It undermines international trade order and rules, hinders normal international economic and trade exchanges, and affects the security and stability of global industrial and supply chains.”

The statement called on the US to “immediately stop its wrong actions” and said: “China will take necessary measures to resolutely protect the legitimate rights and interests of Chinese enterprises.”

Technology company

The goods that the United States wants to prevent Russia from acquiring include sophisticated semiconductors and other technologies needed to build modern high-tech weapons, such as missile guidance systems.

One way Russia tries to circumvent these sanctions is by paying companies outside Russia to buy the materials it needs from US suppliers, claiming they are for domestic use or for non-military purposes, and then bringing the companies to Russia after delivery.

The list of Chinese companies named in the latest Entity List includes a large number of companies that appear to be involved in the distribution of computer technology. Those named include AllChips Limited, Chipgoo Electronics Limited, Hong Kong Haiheng Electronics Co. Ltd., Shenzhen Bailiansheng Electronic Science and Technology Co., Ltd. and Superchip Limited.

In total, companies from 10 countries were added to the list in the last update. Apart from Russia, which accounted for about half of the new additions, China was home to the majority.

Although none of the Chinese companies added to the Entity List this weekend were household names, some high-profile companies in China are subject to restrictions. For example, Chinese telecom giant Huawei has been on the list since 2019. Harbin Institute of Technology, a major public university, is also on the list. In total, the list includes more than 600 Chinese companies.

Impact of inclusion

Once a company is placed on the Entity List, it is illegal for U.S. companies to ship to that company goods that were made in the U.S., were at some point in the U.S., or were made in another country but contain U.S.-made components that make up 25% or more of the product’s value.

Being included on the Entity List could be a devastating blow to companies because it would not only cut them off from U.S. suppliers but could also put them on a blacklist of non-U.S. companies that do not want to do business with them for fear of conflict with U.S. authorities, says Clif Burns, a senior attorney at the law firm Crowell & Moring.

“It can effectively cripple them, especially if they depend on U.S. goods in their supply chain,” Burns told VOA. “And given the way most of the U.S., Europe and developed countries handle screening, in practice they will not do business with you at all if you are on the Entity List.”